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Prime Minister Sanae Takaichi’s snap election gamble paid off, delivering in the process a historic result.

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The Liberal Democratic Party secured 316 of 465 Lower House seats — the first time in the post war era that a single party has exceeded the two-thirds threshold. With the broader ruling coalition holding 352 seats, political uncertainty has materially diminished.

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For investors, clarity is often as important as policy itself. The administration now stands at a strategic crossroads. The central question is not whether fiscal policy will remain proactive — it will — but how it will be executed.

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The base case is that Takaichi pursues a disciplined, pro-growth agenda. The stated objective of “responsible proactive fiscal policy” suggests a blend of near-term support and medium-term structural investment. That would reinforce the structural shifts already underway: Japan’s long-awaited exit from deflation, continued corporate governance reform, and rising capital efficiency.

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If fiscal expansion is paired with credible discipline — and coordinated effectively with the Bank of Japan — the implications for Japanese equities are constructive. Political stability, improving domestic fundamentals and strategic public investment could extend the current rally. Historically, markets have responded favourably to decisive LDP victories, and the strengthened mandate increases the durability of policy execution.

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The alternative path carries greater risk. Proposals such as a temporary elimination of consumption tax on food may support household spending, but funding requirements are significant. Without a clear financing framework, bond markets may test fiscal credibility. Upward pressure on long-term yields and renewed yen weakness would introduce volatility. The US political strategist James Carville once said that if there was reincarnation he wanted to come back as the bond market – that way you can intimidate everybody. For now, the balance of probability favours growth over redistribution.

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In short, Japan has secured a decisive mandate. If that mandate is deployed with economic prudence, the investment case strengthens meaningfully. Takaichi has followed Maciavelli’s dictum and moved decisively to secure what she needs. “The wise man does at once what the fool does finally.” But the dial is hovering between Truss and Thatcher, Takaichi’s major inspiration and we will have to see if her gamble pay’s off. Incidentally, we have added Sumitomo Mitsui DS Asset Management and their Japan High Conviction Fund to our “Buy” list.

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Political conviction, when matched with fiscal discipline, can be a powerful catalyst. Welcome to the Year of the Fire Horse.

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Comments from James Scott-Hopkins, Founder of EXE Capital Management.

The views are those of the author only. The above does not constitute a recommendation to buy specific funds or assets and advice should be sought from your financial advisor as to the appropriateness of this in your portfolio.

The value of investments can fall as well as rise. Past performance is no guarantee of future returns.

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